Diluted EPS increased to $0.68 from $0.51; $0.13 of the increase
related to U.S. tax reform, including a $0.03 benefit from provisional
impacts and a $0.10 benefit from a lower tax rate as a result of U.S.
tax reform

Adjusted Diluted EPS(1) increased to $0.65
from $0.51, and includes a $0.10 benefit from a lower tax rate as a
result of U.S. tax reform

Full Year 2018 Highlights

Net sales increased 8% to $3,424 million

Income from operations increased 12% to $580 million; Adjusted
Income from Operations(1) increased 9% to
$589 million

Diluted EPS increased to $2.82 from $2.22; $0.44 of the increase
related to U.S. tax reform, including a $0.19 benefit from provisional
impacts and a $0.25 benefit from a lower tax rate as a result of U.S.
tax reform

Adjusted Diluted EPS(1) increased to $2.66
from $2.32, and includes a $0.25 benefit from a lower tax rate as a
result of U.S. tax reform

Fiscal Year 2019 Outlook

Net sales expected to increase at mid-single digit rate

Adjusted EBITDA including unconsolidated joint ventures(1)
expected to be $860-$870 million

July 25, 2018 08:30 AM Eastern Daylight Time

EAGLE, Idaho--(BUSINESS WIRE)--Lamb Weston Holdings, Inc. (NYSE: LW) announced today its fourth quarter
and full year 2018 results, and provided its outlook for fiscal 2019.

“We’re pleased with our strong performance in the quarter and for the
full year, and feel good about the operating momentum that we’ve built,”
said Tom Werner, President and CEO. “Our financial results reflect the
favorable operating environment that we’ve enjoyed over the last couple
of years. They also reflect our continued focus on delivering on our
strategic and operational objectives through an ongoing commitment to
support our customers’ growth by investing in additional capacity,
maintaining high levels of service, and developing innovative products
and limited time offerings.”

“For fiscal year 2019, we anticipate the operating environment will
remain generally favorable, with continued solid global demand growth
for frozen potato products and high processing capacity utilization
levels in North America. As a result, we’re targeting another year of
strong sales growth, driven by a good balance of higher price/mix and
volume. We also expect to deliver another year of solid earnings growth
by offsetting input, manufacturing and distribution cost inflation,
while significantly stepping up investments to improve operating
efficiency and drive growth over the long term. By continuing to support
our customers’ growth and executing our strategies, we believe that we
remain well-positioned to create value for our shareholders in fiscal
2019 and beyond.”

Income from operations rose 9 percent to $133.5 million from the prior
year period, and included $0.8 million of pre-tax costs related to the
spinoff from Conagra Brands, Inc. (formerly ConAgra Foods, Inc.,
“Conagra”). The prior year period included $2.8 million of pre-tax costs
related to the spinoff from Conagra and a $3.1 million non-cash gain on
assets.

Excluding these comparability items, income from operations grew $12.1
million, or 10 percent, driven by higher gross profit. Gross profit
increased $35.0 million due to favorable price/mix, volume growth, and
supply chain efficiency savings. The increase was partially offset by
transportation, warehousing, input and manufacturing cost inflation,
higher depreciation expense primarily associated with the Company’s new
french fry production line in Richland, Washington, and higher incentive
compensation costs.

The rise in gross profit was partially offset by a $22.9 million
increase in selling, general and administrative expenses (“SG&A”),
excluding comparability items. The higher SG&A includes incremental
labor and benefits and infrastructure costs associated with being a
stand-alone company, an approximately $7 million increase in investments
in advertising and promotional support, and higher incentive
compensation costs based on operating performance. In addition, the
increase also includes approximately $5 million to establish a new Lamb
Weston charitable foundation, and approximately $3 million of costs
related to transitioning the Company’s Foodservice segment go-to-market
strategy from a broker-led sales model to a direct sales model. The
Company expects this sales model change will lead to stronger customer
relationships and broader customer coverage, providing opportunities to
drive faster growth and improved mix over the long term.

Adjusted EBITDA including unconsolidated joint ventures(1)
was $202.5 million, up 15 percent versus the prior year quarter,
reflecting growth in income from operations and equity method investment
earnings.

Diluted EPS increased $0.17 to $0.68 from $0.51 in the prior year
period. Approximately $0.13 of the increase relates to the U.S. Tax Cuts
and Jobs Act (the “Tax Act”) enacted in December 2017, consisting of a
$0.03 benefit from provisional impacts of the Tax Act and a $0.10
benefit related to adopting a lower tax rate. The remaining increase was
driven by growth in income from operations and equity method investment
earnings.

Adjusted Diluted EPS(1) increased $0.14 to $0.65 from $0.51
in the prior year period, and includes a $0.10 benefit related to
adopting a lower tax rate as a result of the Tax Act. The remaining
increase was driven by growth in income from operations and equity
method investment earnings.

The Company’s effective tax rate(2) was 21.5 percent in the
fourth quarter of fiscal 2018, versus 34.4 percent in the prior year
period. Compared with the fourth quarter of fiscal 2017, the effects of
the Tax Act(3) decreased income tax expense by $17.7 million.
This decrease includes a provisional $4.4 million benefit, comprised of
a $1.2 million increase in the estimated non-cash benefit from the
re-measurement of the Company’s net U.S. deferred tax liabilities using
the new U.S. federal statutory tax rate, and a $3.2 million decrease in
the estimated transition tax on the Company’s previously untaxed foreign
earnings, which is primarily payable over eight years. In addition, the
fourth quarter tax expense also includes a $13.3 million tax benefit
related to the lower U.S. corporate tax rate. In the fourth quarter of
fiscal 2018, the Company’s effective tax rate, excluding $4.4 million of
favorable comparability items arising from the Tax Act(3),
was 24.8%, and reflected the benefit of a slightly lower annual
effective tax rate than estimated in the prior quarter. The Company will
continue to refine these amounts within the measurement period allowed
by Staff Accounting Bulletin (“SAB”) No. 118, which will not exceed one
year from the enactment date of the Tax Act.

Q4 2018 Segment Highlights

Global

Global Segment Summary

Year-Over-Year

Q4 2018

Growth Rates

Price/Mix

Volume

($ in mil.)

Net sales

$

464.7

10%

8%

2%

Segment product contribution margin(1)

$

99.7

21%

Net sales for the Global segment, which is comprised of the top 100
North American based restaurant chain customers as well as the Company’s
international business, increased 10 percent to $464.7 million compared
to the prior year period. Price/mix increased 8 percent, reflecting
price increases as well as improvement in customer and product mix.
Volume increased 2 percent, driven by growth in sales to strategic
customers in North America.

Global segment product contribution margin(1) increased 21
percent to $99.7 million compared to the prior year period, driven by
favorable price/mix and volume growth. The increase was partially offset
by transportation, warehousing, input and manufacturing cost inflation,
higher depreciation expense primarily associated with the new Richland
production line, and higher incentive compensation costs.

Foodservice

Foodservice Segment Summary

Year-Over-Year

Q4 2018

Growth Rates

Price/Mix

Volume

($ in mil.)

Net sales

$

293.3

6%

6%

0%

Segment product contribution margin(1)

$

93.7

6%

Net sales for the Foodservice segment, which services North American
foodservice distributors and restaurant chains outside the top 100 North
American based restaurant chain customers, increased 6 percent to $293.3
million compared to the prior year period. Price/mix increased 6
percent, reflecting pricing actions as well as improvement in customer
and product mix. Volume increased nominally as growth in sales of
higher-margin Lamb Weston-branded and operator-labeled products offset
the loss of some lower-margin, distributor-label product volumes.

Net sales for the Retail segment, which includes sales of branded and
private label products to grocery, mass merchant and club customers in
North America, increased 26 percent to $125.0 million compared to the
prior year period. Volume increased 14 percent, primarily driven by
distribution gains of Grown in Idaho and other branded products,
as well as growth of private label products. Price/mix increased 12
percent, due to improved mix as well as higher prices across the private
label and branded portfolios.

Equity method investment earnings from unconsolidated joint ventures in
the U.S. and Europe were $25.1 million and $23.8 million for the fourth
quarter of fiscal 2018 and 2017, respectively. These amounts included a
$3.3 million unrealized loss related to mark-to-market adjustments
associated with currency and commodity hedging contracts in the current
quarter and a $3.1 million gain in the prior year quarter. Excluding
these adjustments, earnings from equity method investments increased
$7.7 million compared to the prior year period, driven by solid
operating results in Europe and the U.S., including lower raw potato
costs in Europe, volume growth, and a $2.0 million foreign currency
translation benefit. The increase was partially offset by lower
price/mix in Europe.

Income from operations rose 12 percent to $580.1 million from the prior
year, and included $8.7 million of costs related to the spinoff from
Conagra. Fiscal 2017 included $26.5 million of expenses related to the
spinoff from Conagra and a $3.1 million non-cash gain on assets.
Excluding these comparability items, income from operations grew $47.1
million, or 9 percent, driven by higher gross profit.

Gross profit increased $100.7 million, due to favorable price/mix,
volume and supply chain efficiency savings. The increase was partially
offset by transportation, warehousing, input and manufacturing cost
inflation, higher depreciation expense primarily associated with the
Company’s new french fry production line in Richland, Washington, and
higher incentive compensation costs.

The rise in gross profit was partially offset by a $53.6 million
increase in SG&A, excluding the comparability items discussed above. The
higher SG&A includes incremental labor and benefits and infrastructure
costs associated with being a stand-alone company, higher incentive
compensation costs based on operating performance, and a $9.0 million
increase in investments in advertising and promotional support. In
addition, the increase in SG&A also includes approximately $5 million to
establish a new Lamb Weston charitable foundation, and approximately $4
million of costs related to transitioning the Company’s Foodservice
segment go-to-market strategy from a broker-led sales model to a direct
sales model.

Diluted EPS increased $0.60 to $2.82 from $2.22 in fiscal 2017.
Approximately $0.44 of the increase relates to the Tax Act consisting of
a $0.19 benefit from provisional impacts of the Tax Act and a $0.25
benefit related to adopting a lower tax rate. The remaining increase was
driven by growth in income from operations and equity method investment
earnings, partially offset by higher interest expense.

Adjusted Diluted EPS(1) increased $0.34 to $2.66 from $2.32
in the prior year, and includes a $0.25 benefit related to adopting a
lower tax rate as a result of the Tax Act. The remaining increase was
driven by growth in income from operations and equity method investment
earnings, partially offset by higher interest expense.

The Company’s effective tax rate(2) was 21.8 percent for
fiscal 2018. Compared with fiscal 2017, the Tax Act(3)
decreased income tax expense by $64.7 million. This decrease includes a
provisional $28.4 million benefit, comprised of a $39.9 million non-cash
benefit from the re-measurement of the Company’s net U.S. deferred tax
liabilities using the new U.S. federal statutory tax rate, partially
offset by a $11.5 million transition tax on the Company’s previously
untaxed foreign earnings, which is primarily payable over eight years.
In addition, the fiscal 2018 tax expense also includes a $36.3 million
tax benefit related to the lower U.S. corporate tax rate. The Company’s
effective tax rate, excluding $28.4 million of comparability items
arising from the Tax Act(3), was 27.0%. The Company will
continue to refine these amounts within the measurement period allowed
by SAB No. 118, which will not exceed one year from the enactment date
of the Tax Act.

Fiscal Year 2018 Segment Highlights

Global

Global Segment Summary

Year-Over-Year

FY 2018

Growth Rates

Price/Mix

Volume

($ in mil.)

Net sales

$

1,744.2

7%

5%

2%

Segment product contribution margin(1)

$

375.7

11%

Net sales for the Global segment increased 7 percent to $1,744.2 million
compared to fiscal 2017. Price/mix increased 5 percent, largely
reflecting price increases in both domestic and international markets,
as well as improved customer and product mix. Volume increased 2
percent, primarily driven by growth and new business with major
restaurant chains in North America. While net sales in international
markets increased nominally, international volume declined as a result
of the Company’s actions to improve customer and product mix, as well as
lower shipments to certain export markets.

Net sales for the Foodservice segment increased 7 percent to $1,099.1
million compared to fiscal 2017. Price/mix increased 6 percent,
reflecting pricing actions as well as improvement in customer and
product mix. Volume increased 1 percent as growth of higher-margin Lamb
Weston-branded and operator-labeled products more than offset the loss
of some lower-margin, distributor-label product volumes.

Net sales for the Retail segment increased 17 percent to $449.2 million
compared to fiscal 2017. Volume increased 12 percent, primarily driven
by distribution gains of Grown in Idaho and other branded
products, as well as growth of private label products. Price/mix
increased 5 percent, reflecting higher prices across the private label
and branded portfolios, as well as favorable mix, partially offset by
higher trade spending in support of Grown in Idaho branded
products.

Retail segment product contribution margin(1) increased 13
percent to $87.3 million compared to fiscal 2017, driven by higher
price/mix and volume. This increase was partially offset by
transportation, warehousing, input and manufacturing cost inflation, as
well as increased advertising and promotional support behind the
introduction of Grown in Idaho branded products.

Equity Method Investment Earnings

Equity method investment earnings from unconsolidated joint ventures in
the U.S. and Europe were $83.6 million and $53.3 million for fiscal 2018
and 2017, respectively. These amounts included a nominal unrealized loss
related to mark-to-market adjustments associated with currency and
commodity hedging contracts in fiscal 2018 and a $3.6 million gain in
fiscal 2017. Excluding these adjustments, earnings from equity method
investments increased $33.9 million, driven by solid operating results
in Europe and the U.S., including lower raw potato and production costs
in Europe, volume growth, a $5.4 million foreign currency translation
benefit, and an approximate $4 million gain related to a divestiture of
a non-core-business. The increase was partially offset by lower
price/mix in Europe.

Cash Flow

Net cash from operating activities increased $34.3 million to $481.2
million, primarily driven by earnings growth. Capital expenditures
increased $21.6 million to $309.0 million as the Company completed the
construction of a new production line in Richland, Washington, and began
construction of a new production line in Hermiston, Oregon. The Company
also paid $110.2 million in dividends on its common stock.

Outlook

The Company provides earnings guidance on a non-GAAP basis and does not
reconcile guidance to GAAP as the Company cannot predict certain
elements that are included in reported GAAP results, including costs
related to U.S. tax reform and other items impacting comparability.

FY 2019 Outlook Summary

Net sales growth rate

Mid-Single Digit Range

Adjusted EBITDA including unconsolidated joint ventures(1)

$860 million-$870 million

Interest expense

Approximately $110 million

Effective tax rate(2) excluding comparability items

Approximately 24%

Cash used for capital expenditures

Approximately $360 million

For fiscal 2019, the Company expects:

Net sales to grow mid-single digits, with price/mix higher in the
first half of fiscal 2019 versus the second half of the year,
reflecting the carryover impact of customer contract pricing
structures that took effect beginning in the second half of fiscal
2018.

Adjusted EBITDA including unconsolidated joint ventures(1)
in the range of $860 million to $870 million. The Company expects the
rate of gross profit dollar growth to be at least in line with net
sales growth. The Company also expects to incur significantly higher
SG&A as it invests to upgrade its information systems and enterprise
resource planning infrastructure, as well as sales, marketing,
innovation, operations and other functional capabilities, designed to
drive operating efficiencies and support future growth. In addition,
this range includes the impact of the Company exercising its
contractual right to purchase the remaining 50.01% equity interest in
its joint venture, Lamb Weston BSW, LLC, that it currently does not
own (the “call option”). The Company has provided notice to exercise
the call option, and expects to consummate the transaction as soon as
practicable.

In addition, the Company expects:

Total interest expense to be approximately $110 million.

An effective tax rate(2) of approximately 24 percent.

Cash used for capital expenditures of approximately $360 million,
excluding acquisitions, of which approximately $200 million is related
to completing the construction of the Company’s 300 million pound
french fry production line in Hermiston, Oregon, which is expected to
be operational in May 2019.

Total depreciation and amortization expense of approximately $150
million.

End Notes

(1)

Adjusted EBITDA including unconsolidated joint ventures, Adjusted
Income from Operations, Adjusted Diluted EPS and segment product
contribution margin are non-GAAP financial measures. Please see the
discussion of non-GAAP financial measures and the reconciliations at
the end of this press release for more information. See also
“Outlook” in this press release for a discussion of the earnings
guidance on a non-GAAP basis.

(2)

The effective tax rate is calculated as the ratio of income tax
expense to pre-tax income, inclusive of equity method investment
earnings.

(3)

The Tax Act provided $17.7 million, or $0.13 per diluted share, and
$64.7 million, or $0.44 per diluted share, of income tax benefits
during the fourth quarter and full year of fiscal 2018,
respectively, as follows (dollars in millions, except per share
amounts):

Q4 2018

FY 2018

Income

Income

Tax

Diluted

Tax

Diluted

Benefit

EPS

Benefit

EPS

Benefit from lower tax rate (a)

$

13.3

$

0.10

$

36.3

$

0.25

Provisional items, net (b)

4.4

0.03

28.4

0.19

Impact of Tax Act

$

17.7

$

0.13

$

64.7

$

0.44

_____________________

(a)

The Company is required to record the effect of changes in enacted
tax laws or rates in the interim period in which the change occurs.
Accordingly, the Company recorded $13.3 million, or $0.10 per
diluted share, and $36.3 million, or $0.25 per diluted share,
benefit from a lower tax rate, in the fourth quarter and full year
of fiscal 2018, respectively.

(b)

The fourth quarter of fiscal 2018 includes a provisional $4.4
million, or $0.03 per diluted share, net benefit, comprised of a
$3.2 million decrease in the Company’s estimate of the transition
tax owed on previously untaxed foreign earnings, which is primarily
payable over eight years, and a $1.2 million benefit from the
estimated impact of remeasuring the Company’s net U.S. deferred tax
liabilities on its balance sheet at a lower tax rate.

Fiscal 2018 includes a provisional $28.4 million, or $0.19 per
diluted share, net benefit, comprised of a $39.9 million benefit
from the estimated impact of remeasuring the Company’s net U.S.
deferred tax liabilities on its balance sheet at a lower tax rate,
partially offset by an $11.5 million transition tax on its
previously untaxed foreign earnings.

The Company will continue to refine the provisional amounts within
the measurement period allowed by SAB No.118, which will not exceed
one year from the enactment date of the Tax Act.

Webcast and Conference Call Information

Lamb Weston will host a conference call to review its fourth quarter and
fiscal year 2018 results at 10:00 a.m. ET today. Investors and analysts
may access the call toll-free by dialing (855) 719-5012, and using the
event confirmation code of 8635791. A listen-only webcast will be
provided at www.lambweston.com.

About Lamb Weston

Lamb Weston, along with its joint venture partners, is a leading
supplier of frozen potato, sweet potato, appetizer and vegetable
products to restaurants and retailers around the world. For more than 60
years, Lamb Weston has led the industry in innovation, introducing
inventive products that simplify back-of-house management for our
customers and make things more delicious for their customers. From the
fields where Lamb Weston potatoes are grown to proactive customer
partnerships, Lamb Weston always strives for more and never settles.
Because, when we look at a potato, we see possibilities. Learn more
about us at lambweston.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of the federal securities laws. Words such as “continue,”
“focus,” “deliver,” “expect,” “drive,” “support,” “grow,” “will,”
“invest,” “maintain,” “develop,” “anticipate,” “target,” “improve,”
“create,” and variations of such words and similar expressions are
intended to identify forward-looking statements. Examples of
forward-looking statements include, but are not limited to, statements
regarding the Company’s plans, execution, taxes, and business outlook
and prospects. These forward-looking statements are based on
management’s current expectations and are subject to uncertainties and
changes in circumstances. Readers of this press release should
understand that these statements are not guarantees of performance or
results. Many factors could affect the Company’s actual financial
results and cause them to vary materially from the expectations
contained in the forward-looking statements, including those set forth
in this press release. These risks and uncertainties include, among
other things: the Company’s ability to successfully execute its
long-term value creation strategies; its ability to execute on large
capital projects, including construction of new production lines; the
competitive environment and related conditions in the markets in which
it operates; political and economic conditions of the countries in which
it conducts business and other factors related to its international
operations; disruption of its access to export mechanisms; risks
associated with possible acquisitions, including its ability to complete
acquisitions or integrate acquired businesses; its debt levels; the
availability and prices of raw materials; changes in its relationships
with its growers or significant customers; the success of its joint
ventures; actions of governments and regulatory factors affecting its
businesses or joint ventures; the ultimate outcome of litigation or any
product recalls; levels of pension, labor and people-related expenses;
its ability to pay regular quarterly cash dividends and the amounts and
timing of any future dividends; and other risks described in the
Company’s reports filed from time to time with the Securities and
Exchange Commission. The Company cautions readers not to place undue
reliance on any forward-looking statements included in this press
release, which speak only as of the date of this press release. The
Company undertakes no responsibility for updating these statements,
except as required by law.

Non-GAAP Financial Measures

To supplement the financial information included in this press release,
the Company has presented Adjusted Income from Operations, Adjusted
EBITDA including unconsolidated joint ventures, Adjusted Diluted EPS,
and segment product contribution margin, each of which is considered a
non-GAAP financial measure. The non-GAAP financial measures provided
should be viewed in addition to, and not as an alternative for,
financial measures prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP") that are
presented in this press release. The non-GAAP financial measures
presented may differ from similarly titled non-GAAP financial measures
presented by other companies, and other companies may not define these
non-GAAP financial measures the same way. These measures are not
substitutes for their comparable GAAP financial measures, such as net
income, diluted earnings per share, cash flow from operations, or other
measures prescribed by GAAP, and there are limitations to using non-GAAP
financial measures.

Management uses these non-GAAP financial measures to assist in comparing
the Company's performance on a consistent basis for purposes of business
decision making by removing the impact of certain items that management
believes do not directly reflect the Company's underlying operations.
Management believes that presenting these non-GAAP financial measures
provide investors with useful information because they (i) provide
meaningful supplemental information regarding financial performance by
excluding certain items, (ii) permit investors to view performance using
the same tools that management uses to budget, make operating and
strategic decisions, and evaluate historical performance, and (iii)
otherwise provide supplemental information that may be useful to
investors in evaluating the Company's results. The Company believes that
the presentation of these non-GAAP financial measures, when considered
together with the corresponding GAAP financial measures and the
reconciliations to those measures, provides investors with additional
understanding of the factors and trends affecting the Company's business
than could be obtained absent these disclosures.

Lamb Weston Holdings, Inc.

Combined and Consolidated Statements of Earnings

(dollars in millions, except per-share amounts)

Thirteen Weeks Ended

Fifty-Two Weeks Ended

May 27,

May 28,

May 27,

May 28,

2018

2017

2018

2017 (1)

Net sales

$

918.2

$

832.5

$

3,423.7

$

3,168.0

Cost of sales

685.5

634.8

2,544.2

2,389.2

Gross profit

232.7

197.7

879.5

778.8

Selling, general and administrative expenses (2)

99.2

75.2

299.4

260.5

Income from operations

133.5

122.5

580.1

518.3

Interest expense, net

27.7

26.6

108.8

61.2

Income before income taxes and equity method earnings

105.8

95.9

471.3

457.1

Income tax expense (3)

28.1

41.2

121.2

170.2

Equity method investment earnings

25.1

23.8

83.6

53.3

Net income

102.8

78.5

433.7

340.2

Less: Income attributable to noncontrolling interests

2.8

2.6

16.9

13.3

Net income attributable to Lamb Weston Holdings, Inc.

$

100.0

$

75.9

$

416.8

$

326.9

Earnings per share

Basic

$

0.68

$

0.52

$

2.83

$

2.22

Diluted

$

0.68

$

0.51

$

2.82

$

2.22

Dividends declared per common share

$

0.19125

$

0.18750

$

0.75750

$

0.37500

Computation of diluted earnings per share:

Net income attributable to Lamb Weston Holdings, Inc.

$

100.0

$

75.9

$

416.8

$

326.9

Less: Increase in redemption value of noncontrolling interests in
excess of earnings allocated

0.5

0.5

2.7

2.1

Net income available to Lamb Weston common stockholders

$

99.5

$

75.4

$

414.1

$

324.8

Diluted weighted average common shares outstanding

147.1

146.7

147.0

146.6

Diluted earnings per share

$

0.68

$

0.51

$

2.82

$

2.22

_________________

(1)

On November 9, 2016, Lamb Weston Holdings, Inc. (“Lamb Weston”)
separated from Conagra Brands, Inc. (formerly ConAgra Foods, Inc.,
“Conagra”) and became an independent publicly-traded company through
the pro rata distribution by Conagra of 100% of the outstanding
common stock of Lamb Weston to Conagra stockholders (the
“Separation”). The combined and consolidated earnings in all periods
prior to November 9, 2016, were carved out of Conagra’s consolidated
financial statements. These financial statements may not reflect
what the Company’s results of operations would have been had it
operated as a separate stand-alone public company and may not be
indicative of its future results of operations. These financial
statements should be read together with the consolidated financial
statements and notes in the Company’s fiscal 2018 Form 10-K filed
with the Securities and Exchange Commission.

(2)

The thirteen and fifty-two weeks ended May 27, 2018 include $0.8
million and $8.7 million, respectively, of Separation-related
expenses. In all periods, these expenses related primarily to
professional fees.

The thirteen and fifty-two weeks ended May 28, 2017 include $2.8
million and $26.5 million, respectively, of expenses related to the
Separation as discussed in footnote (1) above. In all periods, these
expenses related primarily to professional fees. The thirteen and
fifty-two weeks ended May 28, 2017, both include a $3.1 million
non-cash gain on assets.

(3)

The Tax Act decreased income tax expense by approximately $17.7
million and $64.7 million during the thirteen and fifty-two weeks
ended May 27, 2018, respectively. Compared with the thirteen and
fifty-two weeks ended May 28, 2017, the decrease includes a $4.4
million and $28.4 million provisional net tax benefit from the
estimated impact of remeasuring the Company’s net U.S. deferred tax
liabilities on its balance sheet at a lower tax rate, net of the
Company’s estimate of the transition tax owed on previously untaxed
foreign earnings, which is primarily payable over eight years.
Income tax expense also includes an estimated $13.3 million and
$36.3 million tax benefit related to the lower U.S. corporate tax
rate. The Company will continue to refine the provisional amounts
within the measurement period allowed by SAB No.118, which will not
exceed one year from the enactment date of the Tax Act.

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization of intangibles and debt issuance costs

143.3

109.1

Stock-settled, stock-based compensation expense

13.5

5.7

Earnings of joint ventures in excess of distributions

(35.1)

(22.3)

Deferred income taxes

(3.6)

14.8

Pension expense, net of contributions

(5.9)

0.1

Other

(2.1)

4.8

Changes in operating assets and liabilities:

Receivables

(40.4)

1.2

Inventories

(23.6)

(26.1)

Income taxes payable/receivable, net

13.7

(16.1)

Prepaid expenses and other current assets

(15.5)

(11.9)

Accounts payable

(8.3)

12.1

Accrued liabilities

11.5

35.3

Net cash provided by operating activities

$

481.2

$

446.9

Cash flows from investing activities

Additions to property, plant and equipment

(306.8)

(287.4)

Proceeds from sale of assets

2.2

2.1

Other

(2.2)

—

Net cash used for investing activities

$

(306.8)

$

(285.3)

Cash flows from financing activities

Proceeds (repayments) of short-term borrowings, net

(14.4)

(2.8)

Proceeds from issuance of debt

—

798.1

Debt repayments

(39.2)

(23.8)

Net transfers to Conagra

—

(38.8)

Dividends paid

(110.2)

(27.4)

Cash distributions paid to Conagra at Separation

—

(823.5)

Payments of debt issuance costs

—

(12.3)

Cash distributions paid to noncontrolling interest

(14.6)

(12.2)

Other

(0.5)

0.7

Net cash used for financing activities

$

(178.9)

$

(142.0)

Effect of exchange rate changes on cash and cash equivalents

3.0

1.1

Net increase (decrease) in cash and cash equivalents

(1.5)

20.7

Cash and cash equivalents, beginning of the period

57.1

36.4

Cash and cash equivalents, end of period

$

55.6

$

57.1

Lamb Weston Holdings, Inc.

Segment Information

(unaudited, dollars in millions)

Thirteen Weeks Ended

Year-Over-

May 27,

May 28,

Year Growth

2018

2017

Rates

Price/Mix

Volume

Segment sales

Global

$

464.7

$

421.4

10

%

8

%

2

%

Foodservice

293.3

277.0

6

%

6

%

0

%

Retail

125.0

99.0

26

%

12

%

14

%

Other

35.2

35.1

0

%

0

%

0

%

$

918.2

$

832.5

10

%

8

%

2

%

Segment product contribution margin (1)

Global

$

99.7

$

82.6

21

%

Foodservice

93.7

88.6

6

%

Retail

21.3

14.5

47

%

Other

3.1

4.5

(31

%)

217.8

190.2

15

%

Other selling, general, and administrative expenses (2)

84.3

67.7

25

%

Income from operations

$

133.5

$

122.5

9

%

Items impacting comparability (2)

Expenses related to the Separation

$

0.8

$

2.8

Non-cash gain on assets

—

(3.1

)

Adjusted income from operations (3)

$

134.3

$

122.2

10

%

_______________

(1)

Product contribution margin is defined as net sales, less cost of
sales and advertising and promotion expenses. Segment product
contribution margin excludes general corporate expenses and interest
expense because management believes these amounts are not directly
associated with segment performance for the period.

(2)

The thirteen weeks ended May 27, 2018 and May 28, 2017 include $0.8
million and $2.8 million, respectively, of expenses related to the
Separation. These expenses related primarily to professional fees.

The thirteen weeks ended May 28, 2017 includes a $3.1 million
non-cash gain on assets.

(3)

Adjusted income from operations is a non-GAAP financial measure.
Management excludes items impacting comparability between periods as
it believes these items are not necessarily reflective of the
ongoing operations of the Company. These non-GAAP measures provide a
means to evaluate the performance of Lamb Weston’s segments and the
Company on an ongoing basis using the same measures that are
frequently used by the Company’s management and assist in providing
a meaningful comparison between periods. Any analysis of non-GAAP
financial measures should be done only in conjunction with results
presented in accordance with GAAP. The non-GAAP measures are not
intended to be substitutes for GAAP financial measures and should
not be used as such.

Lamb Weston Holdings, Inc.

Segment Information

(unaudited, dollars in millions)

Fifty-Two Weeks Ended

Year-Over-

May 27,

May 28,

Year Growth

2018

2017

Rates

Price/Mix

Volume

Segment sales

Global

$

1,744.2

$

1,624.8

7

%

5

%

2

%

Foodservice

1,099.1

1,030.0

7

%

6

%

1

%

Retail

449.2

384.9

17

%

5

%

12

%

Other

131.2

128.3

2

%

7

%

(5

%)

$

3,423.7

$

3,168.0

8

%

6

%

2

%

Segment product contribution margin (1)

Global

$

375.7

$

338.6

11

%

Foodservice

365.9

330.7

11

%

Retail

87.3

77.6

13

%

Other

19.0

9.3

NM

847.9

756.2

12

%

Other selling, general, and administrative expenses (2)

267.8

237.9

13

%

Income from operations

$

580.1

$

518.3

12

%

Items impacting comparability (2)

Expenses related to the Separation

$

8.7

$

26.5

Non-cash gain on assets

—

(3.1

)

Adjusted income from operations (3)

$

588.8

$

541.7

9

%

(1)

Product contribution margin is defined as net sales, less cost of
sales and advertising and promotion expenses. Segment product
contribution margin excludes general corporate expenses and interest
expense because management believes these amounts are not directly
associated with segment performance for the period.

(2)

The fifty-two weeks ended May 27, 2018 and May 28, 2017 include $8.7
million and $26.5 million, respectively, of expenses related to the
Separation. These expenses related primarily to professional fees.

The fifty-two weeks ended May 28, 2017 includes a $3.1 million
non-cash gain on assets.

(3)

Adjusted income from operations is a non-GAAP financial measure.
Management excludes items impacting comparability between periods as
it believes these items are not necessarily reflective of the
ongoing operations of the Company. These non-GAAP measures provide a
means to evaluate the performance of Lamb Weston’s segments and the
Company on an ongoing basis using the same measures that are
frequently used by the Company’s management and assist in providing
a meaningful comparison between periods. Any analysis of non-GAAP
financial measures should be done only in conjunction with results
presented in accordance with GAAP. The non-GAAP measures are not
intended to be substitutes for GAAP financial measures and should
not be used as such.

Lamb Weston Holdings, Inc.

Reconciliation of Non-GAAP Financial Measures

(unaudited, dollars in millions, except per-share amounts)

Thirteen Weeks Ended May 27, 2018

Income FromOperations

InterestExpense

IncomeTaxExpense

EquityMethodInvestmentEarnings

Net Income

Less: IncomeAttributable toNoncontrollingInterests

Net IncomeAttributableto LambWeston

DilutedEPS

As reported

$

133.5

$

27.7

$

28.1

$

25.1

$

102.8

$

2.8

$

100.0

$

0.68

Items impacting comparability (1) (2):

Expenses related to the Separation

0.8

—

0.2

—

0.6

—

0.6

—

Tax Reform

—

—

4.4

—

(4.4

)

—

(4.4

)

(0.03

)

Total items impacting comparability

0.8

—

4.6

—

(3.8

)

—

(3.8

)

(0.03

)

Adjusted (3)

$

134.3

$

27.7

$

32.7

$

25.1

$

99.0

$

2.8

$

96.2

$

0.65

Thirteen Weeks Ended May 28, 2017

Income FromOperations

InterestExpense

IncomeTaxExpense

EquityMethodInvestmentEarnings

Net Income

Less: IncomeAttributable toNoncontrollingInterests

Net IncomeAttributableto LambWeston

DilutedEPS

As reported

$

122.5

$

26.6

$

41.2

$

23.8

$

78.5

$

2.6

$

75.9

$

0.51

Items impacting comparability (1) (2):

Expenses related to the Separation

2.8

—

1.0

—

1.8

—

1.8

0.01

Non-cash gain on assets

(3.1

)

—

(1.1

)

—

(2.0

)

—

(2.0

)

(0.01

)

Total items impacting comparability

(0.3

)

—

(0.1

)

—

(0.2

)

—

(0.2

)

—

Adjusted (3)

$

122.2

$

26.6

$

41.1

$

23.8

$

78.3

$

2.6

$

75.7

$

0.51

Fifty-Two Weeks Ended May 27, 2018

Income FromOperations

InterestExpense

IncomeTaxExpense

EquityMethodInvestmentEarnings

Net Income

Less: IncomeAttributable toNoncontrollingInterests

Net IncomeAttributableto LambWeston

DilutedEPS

As reported

$

580.1

$

108.8

$

121.2

$

83.6

$

433.7

$

16.9

$

416.8

$

2.82

Items impacting comparability (1) (2):

Expenses related to the Separation

8.7

—

3.0

—

5.7

—

5.7

0.03

Tax Reform (2)

—

—

28.4

—

(28.4

)

—

(28.4

)

(0.19

)

Total items impacting comparability

8.7

—

31.4

—

(22.7

)

—

(22.7

)

(0.16

)

Adjusted (3)

$

588.8

$

108.8

$

152.6

$

83.6

$

411.0

$

16.9

$

394.1

$

2.66

Fifty-Two Weeks Ended May 28, 2017

Income FromOperations

InterestExpense

IncomeTaxExpense

EquityMethodInvestmentEarnings

Net Income

Less: IncomeAttributable toNoncontrollingInterests

Net IncomeAttributableto LambWeston

DilutedEPS

As reported

$

518.3

$

61.2

$

170.2

$

53.3

$

340.2

$

13.3

$

326.9

$

2.22

Items impacting comparability (1) (2):

Expenses related to the Separation

26.5

—

9.8

—

16.7

—

16.7

0.11

Non-cash gain on assets

(3.1

)

—

(1.1

)

—

(2.0

)

—

(2.0

)

(0.01

)

Total items impacting comparability

23.4

—

8.7

—

14.7

—

14.7

0.10

Adjusted (3)

$

541.7

$

61.2

$

178.9

$

53.3

$

354.9

$

13.3

$

341.6

$

2.32

___________________

(1)

See footnotes (2) and (3) to the Combined and Consolidated
Statements of Earnings above for a discussion of the items impacting
comparability.

(2)

Items impacting comparability are tax-effected at the marginal rate
based on the applicable tax jurisdiction.

(3)

Adjusted income from operations, income tax expense, equity method
investment earnings, net income, net income attributable to Lamb
Weston and diluted earnings per share are non-GAAP financial
measures. Management excludes items impacting comparability between
periods as it believes these items are not necessarily reflective of
the ongoing operations of Lamb Weston. These non-GAAP measures
provide a means to evaluate the performance of Lamb Weston on an
ongoing basis using the same measures that are frequently used by
the Company’s management and assist in providing a meaningful
comparison between periods. Any analysis of non-GAAP financial
measures should be done only in conjunction with results presented
in accordance with GAAP. The non-GAAP measures are not intended to
be substitutes for GAAP financial measures and should not be used as
such.

To supplement the financial information included in this press release,
the Company has presented Adjusted EBITDA including unconsolidated joint
ventures, which is considered a non-GAAP financial measure. The
following table reconciles net income attributable to Lamb Weston to
Adjusted EBITDA including unconsolidated joint ventures.

Thirteen Weeks Ended

Fifty-Two Weeks Ended

May 27,

May 28,

May 27,

May 28,

2018

2017

2018

2017

Net income attributable to Lamb Weston Holdings, Inc.

$

100.0

$

75.9

$

416.8

$

326.9

Income attributable to noncontrolling interests

2.8

2.6

16.9

13.3

Equity method investment earnings

(25.1

)

(23.8

)

(83.6

)

(53.3

)

Interest expense, net

27.7

26.6

108.8

61.2

Income tax expense

28.1

41.2

121.2

170.2

Income from operations

133.5

122.5

580.1

518.3

Depreciation and amortization

38.0

28.4

138.7

106.6

Items impacting comparability (1)

Expenses related to the Separation

0.8

2.8

8.7

26.5

Non-cash gain on assets

—

(3.1

)

—

(3.1

)

Adjusted EBITDA (2) (3)

172.3

150.6

727.5

648.3

Unconsolidated Joint Ventures (4)

Equity method investment earnings

25.1

23.8

83.6

53.3

Interest expense, income tax expense, and depreciation and

amortization included in equity method investment earnings

8.9

5.6

30.3

22.5

Add: EBITDA from unconsolidated joint ventures

34.0

29.4

113.9

75.8

Consolidated Joint Ventures (4)

Income attributable to noncontrolling interests

(2.8

)

(2.6

)

(16.9

)

(13.3

)

Interest expense, income tax expense, and depreciation and

amortization included in income attributable to noncontrolling
interests

(1.0

)

(1.0

)

(4.1

)

(3.7

)

Subtract: EBITDA from consolidated joint ventures

(3.8

)

(3.6

)

(21.0

)

(17.0

)

Adjusted EBITDA including unconsolidated joint ventures (2)

$

202.5

$

176.4

$

820.4

$

707.1

_____________

(1)

See footnotes (2) and (3) to the Combined and Consolidated
Statements of Earnings above for a discussion of the items impacting
comparability.

(2)

Adjusted EBITDA including unconsolidated joint ventures is a
non-GAAP financial measure. Management excludes items impacting
comparability between periods as it believes these items are not
necessarily reflective of the ongoing operations of the Company.
Lamb Weston presents this measure because the Company believes it
provides a means to evaluate the performance of the Company on an
ongoing basis using the same measure frequently used by the
Company’s management and assists in providing a meaningful
comparison between periods. Any analysis of non-GAAP financial
measures should be done only in conjunction with results presented
in accordance with GAAP. This non-GAAP measure is not intended to be
a substitute for GAAP financial measures and should not be used as
such.

(3)

Adjusted EBITDA includes EBITDA from consolidated joint ventures.

(4)

Lamb Weston holds equity interests in three potato processing joint
ventures, including 49.99% of Lamb Weston BSW, LLC and 50% of
Lamb-Weston/RDO Frozen and Lamb-Weston/Meijer v.o.f. Lamb Weston
consolidates the financial statements of Lamb Weston BSW, LLC and
accounts for its ownership in the other joint ventures under the
equity method of accounting.